View all notes
Instead of treating human capital as a national resource the way David Starr Jordan and company first planned it, America’s new leaders applied Garrett Hardin’s tragic-commons logic: If they were giving it away, people would go to school and, say, invent radical new theatrical art practices instead of building bombs like they were supposed to. With education enclosed, on the other hand, the market could properly value it and ensure its best use. Students began to think of themselves in the same terms, as a walking, talking set of investments; in a bifurcated world, they couldn’t afford not to. Silicon Valley employers, meanwhile, used their two-track labor force to keep unions out of the regional industry. For the highly waged, firms introduced all sorts of fun perks, from team getaways to gourmet meals and free beer. National Semiconductor invested millions of dollars in a 14-acre “Employee Recreation Park.”31 Referral bonuses encouraged workers to talk up their firms to their friends. Bosses eschewed formal hierarchy and opened up the floor plan. Fighting alienation at work by making the workplace more fun, more personal, was a flexible way to attract workers and keep labor organizers at bay—these freebies were easier to withdraw in lean times, such as the early ’80s downturn, which briefly reached the Valley in ’82, than wages and promised benefits. “The Pentagon is an active collaborator in union-busting,” wrote scholars Ann Markusen and Joel Yudken at the time, and the state encouraged investment in non-union areas.32 Three of the top four counties for prime DOD contracts at the end of Reagan’s first term were in California, including Santa Clara at number 3.33 The county nabbed 3 percent of all DOD contracts in 1980, five times its fair share by population.34 Silicon Valley became a labor-relations model, and the CEOs became national figures. “Organization in a high growth company is people oriented,” the ASK Computer Systems founder and CEO, Sandra Kurtzig, explained to a joint congressional committee in 1984. “The company functions as a family. It takes care of employees who perform, but nonperformers are unwelcome and unwanted. And we’re fortunate that we don’t have labor unions in Silicon Valley because of the orientation toward people.”35 What a strange family.
With Reagan in office, the hard-core ideological capitalists running the White House used American might to leverage a global policy revolution along Hooverite lines. By shifting the balance of class power everywhere toward local elites, they triggered a virtuous cycle of financial growth, analogous to the one that drove domestic asset prices up. Overseas capitalists had to invest their profits, and since they were subject to the same global-historical pressures as American capitalists, their money tended toward the same financial sinks, a disproportionate number of which were headquartered in the United States. Instead of supporting allies with Marshall Plan funds and secret war-gold stashes, the United States and U.S.-led institutions offered these countries large loans, which could be paid by privatizing public assets and even forgiven in exchange for Hooverite reforms. Undemocratic leaders had plenty to gain from the loans (which supported extravagant lifestyles and loyalist coteries), the privatization (which offered opportunities for bribes and self-dealing), and the reforms themselves (which shifted the economic surplus in their favor). They could also afford plenty of American weapons, which helped make it possible for the regimes to protect themselves by attacking their own working classes. As capital concentrated in fewer hands, it grew easier to get everyone on this same page, a page later named the Washington Consensus.
nothing new but a useful concise summary
Talking about how the American labor market channeled various groups of post-1965 immigrants risks repeating tired ethnic stereotypes that still plague the country’s psyche. But not talking about it risks naturalizing the same patterns, reinforcing false ideas about ethnic suitability for certain jobs and the role of Asian immigrants in general in America. Only by putting this sequence in its global economic-historical context can we understand, for example, the relationship between Korean immigrants and urban corner stores. A disproportionate number of post-1965 Asian immigrants gravitated toward small-business ownership for a whole slew of reasons: If they bought one, immigration rules permitted individuals to enter the country regardless of their point-system scores; small businesses allowed families to informally employ their own members at low wages, lending the enterprises a competitive advantage; as their own bosses, immigrants didn’t exaggerate the necessity of English language skills, as an anglophone employer might; members of a generation of white ethnic small-business owners were nearing the ends of their lives after having successfully assimilated their children into professional jobs and felt compelled to sell their shops; educated professionals who couldn’t traverse the American credentials system had access to modest loans and pooled capital from their community networks; suburban expansion in the South and West created demand for small concerns to fill out the new strip malls. Low-capital, labor-intensive businesses such as restaurants, doughnut bakeries, small groceries, auto-repair garages, newsstands, motels, nail salons, liquor shops, and convenience stores were viable enough, but small profit margins meant that self- and family exploitation was the only way to make any money. Ronald Takaki calls it an “opportune moment” to become a shopkeeper, and yet he also notes that a “study of Korean business owners showed that more than 90 percent of them worked harder and lived more frugally here than they had in Korea.”39 It’s this decline in living standards that Reagan admired when he hailed Asians and Pacific Islanders as model minorities: All workers should work so hard and live so frugally! The president sounded a lot like his forerunner in Sacramento, Leland Stanford, at least when the robber baron was feeling charitable toward his laborers.
For cronies attached to America-supported regimes, California was irresistible. A cornucopia of start-up and suburban development and shopping-center and office-tower projects promised high returns on big investments under safe conditions, even if things went badly at home. “They come over here with shopping bags full of money—real money,” one Palo Alto real estate agent told the San Jose Mercury News in 1985, regarding Filipino investors.50 The article was part of an investigative series by the Merc into capital flight from the islands to the Bay Area, which revealed a network of elites affiliated with President Ferdinand Marcos siphoning billions of dollars out of the country’s coffers into their own accounts and portfolios—billions the regime had borrowed from international lenders on their people’s credit line. Corrupt authoritarians had to invest, too, and among the best ways to do it was to dump a pile of cash on a California lawyer’s desk.
In one case, a government fund directed by the infamous embezzler (and first lady) Imelda Marcos invested millions to acquire three Silicon Valley tech firms through a holding company.51 Prominent among the elite Filipino investors in California was Enrique Zóbel, whose namesake, recall, was the Falangist father-in-law of Ampex co-owner Joe McMicking. Now that the family fortune was restored, Zóbel’s Ayala International controlled two hotel projects in San Francisco and Los Angeles worth a combined $73 million.52 “They have money in Switzerland and money all over,” one Silicon Valley electronics executive told the Mercury about the Filipino investors he worked with, “but the really wealthy put their money over here, always with the expectation something could go wrong. One man told me: ‘As long as I can get out of the Philippines and get to a telephone, I’m in no trouble.’”53 Investing in California meant, whether a communist revolution or democratic regime change, the country’s rich could stay rich. The Mercury’s “Hidden Billions: The Draining of the Philippines” series created a stir on the islands. Local papers repeated the articles in excerpt and in full. At a time of financial hardship, this “dollar salting” took food out of hungry mouths, retarded economic development, and ran up a $28 billion tab.54 The ensuing scandal helped pressure President Marcos to concede to the early elections that removed him from power.
The IBM PC was a departure point for the home computer’s intellectual property regime, raising and answering questions in equal measure. By effectively waving away IP claims on the market’s hottest commodity, Big Blue made room for some of its contractors to pursue their own. Two of these contractors in particular hitched their chariots to the winged horses Copyright and Trademark, escaping the gravitational pull of linear growth and launching into the sky, surpassing even IBM itself. More than the commercial tower PC’s successful originators at IBM, Microsoft and Intel came to define the product. As of this writing, Intel’s market cap is almost twice IBM’s, while Microsoft holds an unseemly advantage that nears 20–1. IBM’s choice to create an IP-less PC was smart from the perspective of development speed, and it made the giant untouchable to antitrust authorities. But the real money from the PC boom went to firms that used the law’s protections to secure monopoly superprofits.ix That’s how Bill Gates became, for a time, the world’s richest man.
Americans like to tell the story of the early microcomputer industry in Silicon Valley as a history of invention. At its most facile, this manifests itself in stories of individual iconic businessman geniuses: David Packard, Gordon Moore and Robert Noyce, Steves Jobs and Wozniak, Bill Gates and Paul Allen. Even if they may not have been the best engineers or programmers in the region—only a couple of them were even in that conversation—they were visionaries who saw the future in advance. The true path of invention is rarely clean or simple, but when scientific credit fails to align with net worth, the second trumps the first in public memory. After all, crediting inventors is notoriously difficult; every innovation building on the last, every inventor inextricably embedded in a series of communities. Two or more often alight on the same idea at the same time. Money provides a sort of scoreboard, an equivalent by which we can compare the otherwise incomparable. Steve Jobs goes on the THINK DIFFERENT poster, just as Leland Stanford stars in the Southern Pacific’s celebratory painting. Judah and Wozniak go down in history as the brains behind their operations, and the workers who built the tracks and assembled the chips are background figures at best.
Like a not inconsiderable number of other people, Bill Gates was in the right place at the right time to write an operating system for the first generation of personal computers. That he did not write one of them isn’t surprising, since a lot of other people didn’t, either. What distinguishes Gates is that, unlike everyone else, he came to own the legal rights to PC-DOS. Why him, and how? The “Open Letter to Hobbyists” helps explain. It’s a landmark assertion of property rights within the community: It attempts to draw a thick line between the hobbyist era and the microcomputer industry, and it’s characteristic of the way Gates made his billions with Microsoft. The Homebrew pirates saw computer science as essentially a public domain, and in the 1970s, in a descriptive sense, they were right. Public dollars paid for almost all the computing power in the country, even when the computers were technically privately owned. The hackers could point to Gates’s use of the ARPA PDP at Harvard not only because they had experience pulling the same con, using official processors after hours for personal projects, but also because there were only so many computers he could have used to write the BASIC interpreter. They all learned to code on publicly financed Big Science machines, whether at universities, at commercial defense contractors, or in the military itself. With a draft on, where exactly individuals fit in this complex wasn’t usually up to them anyway. The knowledge products of that work, like BASIC, belonged to the people. It was acceptable to use the knowledge to make products and sell them—hobbyists were always first in line to buy, too—but to fence off an important set of instructions and start charging monopoly rents for them was an audacious move. [...]
Unheard-of sums flowed through these men; what did Gates and Jobs represent to the money they attracted? The Xerox PARC visit infused Apple’s Mac with years of prized research and development, and they didn’t do it because they liked the boss—Jobs literally stunk up the place—or even for the opportunity to invest. Contracting with Apple was a way to solve the problem of the company’s labor costs, secured by the firm’s workers during the previous decades, when big business, big government, and big labor collaborated to split the proceeds of racing growth. Apple combined great branding with the worst of Silicon Valley’s labor practices. Journalist Michael Malone, fellow son of the Bay Area space settlers, described the hypocrisy: “While the company propaganda stressed its community, its democracy, its adherence to the ideals of the Howdy Doody generation, each day an unmarked car picked up blank boards and boxes of chips from Apple’s back door and delivered them to a roomful of Filipino women and housewives in a Saratoga home, who watched soap operas and stuffed boards at piece rates.”42 That network is what really made Apple a desirable partner.
These were the first internet boom years, when vast arrays of internetworked hardware promised to disrupt every industry in the world. Companies raced to snap up networking and hosting equipment from 3Com, Cisco, and Sun as well as the software-as-a-service offerings of Oracle. Buoyed by market enthusiasm, the firms scaled by acquisition, interweaving into friendly keiretsus through their shared shareholders. In 1995, Bechtolsheim left Sun to found a company devoted to speeding up Ethernet, which was quickly snapped up by Cisco for a cool $220 million, a nice payback to Bechtolsheim for designing the company’s original computer board.10 The firm 3Com got so big that it bought the naming rights to Candlestick Park, home of the San Francisco Giants and 49ers, a venue previously named for the chilly promontory where it had sat since the baseball team moved there, in 1960. Though I have it on good authority that some fans declined to use the privatized name, it marked a new era for the region, which had become something different over the previous decade and a half. Palo Alto and Silicon Valley and Stanford and tech and the internet stood for more than the newest electronics; that cluster of nouns meant a new way of doing business, a new plan for growth in a unipolar American capitalist world. They stood for getting fucking rich.
The internet’s business implications were huge. Long before the Valley became associated with “disruption,” Kenney and von Burg pointed out that, with internetworking, “industries that appeared to stabilize, in terms of organizational forms or business models, could be reopened for new rounds of firm formation.”12 That meant growth—albeit the destructive kind—and Silicon Valley became a bipartisan darling as it promised a new phase of postindustrial American expansion. The NASDAQ composite index grew from under 200 in the 1982 recession to over 5,000 in the spring of 2000. With support from the so-called Atari Democrats such as Paul Tsongas, Gary Hart, and Al Gore, the tech industry sealed the precepts of the Reagan Revolution into new and seemingly permanent layers of national infrastructure, from defense and finance to computing and telecommunications to who knows what else. These lean tech firms wiggled out from under the obligations of the New Deal and compensatory versions of the state, and it showed in their numbers. Capital utilization was high, as was revenue per employee, and their profit margins reflected their monopoly positions. Key employees were committed to companies through stock options and grants. One hundred years or so later, it was strikingly analogous to the railroad boom. And as in the joint-stock model back then, the financial regime was about as important as the underlying technology.